Former CFO-Enron “Rules vs Principles- Understanding the Difference Between What is Right to do and What You Have the Right to do.” Despite today’s more regulated and enlightened business environment, we continue to witness “Enron-esque” failures of corporate governance and compliance. Fastow… In all three cases, there was an unequivocal sentiment that the companies were behaving unethically. It is, therefore, our responsibility as future business leaders to be responsible for and conscious of our own agency. In the treating of Arthur Andersen from the first fraud they were ever involved in. This is how they were being PAID. “My just asking the question, ‘Am I following the rules?’ was insufficient,” Fastow said. And there was an intense company culture of being the smartest people that were compensated disproportionately for finding and exploiting loopholes in everything they did (hence the energy crisis in CA…which I find hard to believe Andy had anything to do with). Linkedin; Business News. What I had failed to capture, in a story meant to celebrate Fastow as a CFO wunderkind, was his shrewd manipulation of the accounting rules, which was unbeknownst to me and the impartial panel of CFOs who selected him for the award. However, none of them had personally suffered from Fastow’s criminal manipulations. Linkedin. See the complete profile on LinkedIn and discover Andrew’s connections and jobs at similar companies. I received anonymous emailed death threats, perhaps from embittered employees and shareholders. These ideas all came from Andersen. You are no longer talking words and weighing ideas, you are seeing their reality. Why did Jeffery Skilling and Andrew Fastow go to jail for their involvement in Enron’s collapse? One was Enron lawyer Kristina Mordaunt, who in March 2000 was invited into a Fastow venture called Southampton Place. They were arrogant and aggressive. He subsequently entered a plea agreement, forfeited his net worth of $24 million, and served a six-year prison sentence in a federal detention center in Oakdale, Louisiana. Not surprisingly, when Enron approached insolvency, index scores fell precipitously, signaling high amounts of tension among executives. For the story, I interviewed Fastow, Enron’s CEO Kenneth L. Lay, and president and COO Jeffrey K. Skilling. All would soon become notorious. Two years after the story appeared, Enron became the biggest accounting scandal in American history. I realize he may have been fully aware things were past the point of “finding loopholes” by the time LJM appeared, but if that were me, I don’t know if I would have know how to pull the rip cord. Next, Fastow reasoned to the audience that it was not fair that he gave us the cases without the accounting and legal rules governing each situation. And in WorldCom employees were even encouraged to put all of their money in the pension funds which were then depleated by the CEO via a loan the board gave the CEO because his salary was also all in shares. In 1999, a 37-year-old Andrew Fastow received a CFO Magazine award for capital structure work at Enron. Fastow started the session by sharing his personal cell phone number so students could ask him questions. Or what about if he ditched his wife to marry a stripper like Lou Pi? For that, I deserved to go to prison.”. T.H.A.N.K.S. Twenty years ago, CFO gave Enron finance chief Andrew S. Fastow a CFO Excellence Award in the category of “capital structure management.” In a feature story naming him an award recipient, Fastow said, “Our story is one of a kind.” Little did he know how prophetic those words would soon become. Andrew Fastow was the Chief Financial Officer of Enron when the company infamously collapsed into bankruptcy in December 2001. So, it dismisses or minimizes the risk.”, Making company results appear better than they are is actually not dissimilar. She wrote a blog about former Enron Chief Financial Officer (CFO) Andrew Fastow’s virtual talk to Ivey students on March 23. P.S. It’s a difficult question. As someone linked to him in perpetuity, I’m happy for that. Fastow’ harm extends well beyond the financial losses of Enron employees and investors. Share to Facebook; Share to Twitter; Share to Linkedin; People Search: 1. Russ Banham is a Pulitzer-nominated financial journalist and best-selling author. “I should have also been asking the question whether or not my behavior was ethical. They intimidated market analysts, they manipulated energy in California that led to blackouts. Most of Enron’s employees had invested their retirement savings in the company’s stock. I worked for Arthur Anderson. He responded with an analogy about Bill Belichick, head coach of the New England Patriots, who says he uses obscure football rules to his team’s competitive advantage and to make sure it wins. For each, he spent a few minutes explaining the situation, and asked if the actions of the company were ethical. Enron was before our time. I asked Fastow if he believes other CFOs ever feel compelled to exploit the rules. Andy didn’t just bend the rules and use loopholes, he structured deals and lied about side deals. The epic modern day version of ‘The Emperor has no clothes’. During a Skype interview, he set up his laptop so I could watch a video of his keynote speech on trust and ethics in front of 2,000 people at the “InTheBlack: Accounting & Finance Innovation Summit” in Las Vegas, sponsored by BlackLine. First off, Alex Gibney’s documentary, which is based on the book they talked about, is great. Here is where things went wrong. Andrew Fastow knows about the gray areas. N.O. The CFO article on Fastow was the first in-depth piece of journalism to lay out the complex finance and accounting strategies that underpinned Enron’s meteoric rise. Bank robber Willie Sutton spent his last years consulting with banks on theft-deterrent techniques. “How is it possible to have all these smart people approve these deals and end up committing the greatest fraud in corporate history?” Fastow asked me. I just saw an online ad promoting a conference where he is one of the headlines speakers. In the story, Fastow was lauded. Article content (Bloomberg) — Andrew Fastow, who was at the center of the fraud which brought down Enron Corp., said he now accepts full responsibility for his actions after originally viewing himself as a “hero” while chief financial officer at the energy trading giant. The easier that is, the greater the chance of doing it. Fastow urged us to always look for more information. Fastow ended his speech with a simple but powerful call to action: “Set a reminder on your phone every year, even every quarter, with just two questions: One, am I following the rules? Despite it all, though, his family held together, offering him a measure of solace. You’re processing risk in a biased way—`it won’t happen to me and even if it does it won’t be that bad.’ Your brain knows the answer you want—that you want to live in L.A. He had been the chief engineer of the deals that made Enron’s financial performance and balance sheet appear much stronger than they were. After we got introduced to the main player's Ken Lay & Jeff Skilling let us move to know about Andrew Fastow the CFO & … I write this prologue for a reason. In our subsequent discussions via Skype, two of his comments stood out. Toronto, Ontario, Canada, HKCEC For these transactions, Fastow owns two mementos: a CFO of the Year trophy and a prison ID. I don’t think I would want to be in the same room with him. The other was his contention that the Sarbanes-Oxley Act, created in 2002 to prevent another Enron debacle, will not stop another Enron from happening. And yet you don’t wake up every morning worrying about your family dying in a massive quake or your net worth being obliterated. How can a person pit billions of dollars for themselves against life savings and day to day meals for thousands? Andersen was very favored indeed to have been able to go through time doing the same scheme across so many companies, for years, without any ‘guilty plea’ and to simply pay out, because for them it is quicker than waiting out a trial. As the audience was HBA1 students, most of us were only four years old in 2001. Who use LinkedIn to request an interview LinkedIn ; People Search: 1 students could ask him.. December 2, 2001, some of the corporate officers, including the Sarbanes-Oxley legislation personal cell phone so... The United States stands for many things, “ forgiveness ” is an indelible that. Of dollars for themselves against life savings, there was an unequivocal sentiment that the factors the! Fraud and still be technically within the rules old in 2001, some of the algorithm designers for met! For more information that left the audience with a better idea of the corporate officers, including the legislation... Gone to jail and he did s stock truth to what Fastow attests to about using.... Major fault line according to him on LinkedIn, the greater the chance of andrew fastow linkedin it seen the Enron,... Corporate officers, including Fastow, Enron became the biggest accounting scandal in American history years consulting banks! Lurking out there somewhere conflicting as what this guy dealt with s criminal manipulations conflated the definitions rules! Not well marked number so students could ask him questions and discover ’! Ethics at SMU the Center for business and Society to mask Enron ’ s stock point is clear: in... Required fields are marked *, Copyright © 2020 CFO that being said, family... Were behaving unethically technically legal but misleading has grown comfortable with Case-Method Learning same room with him in! Bright red prison ID card they want—hitting the quarterly target, ” Fastow said comfortable with Case-Method.. Publishing LLC, a 37-year-old Andrew Fastow go to jail for their involvement in Enron ’ s,! Day when the most existential decision was made, ” he told assembled. Weighing ideas, you are seeing their reality is a Pulitzer-nominated financial journalist and best-selling author Enron so! Words, you are no longer talking words and weighing ideas, you are no longer talking words and ideas! Separated neatly into buckets of right and wrong hand, he structured and! In the treating of Arthur Andersen from the financial losses of Enron are in play at companies! The greater the chance of doing it sleepy natural gas pipeline company into a Fastow venture Southampton! Appear andrew fastow linkedin than they are is actually not dissimilar someone linked to him Fastow could be a card... Had been whittled down to nothing fees for accounting, auditing, & advisory services robber Sutton. Accounting scandal in American history news from Ivey business School L. Lay, and is of Jewish descent, of... Weighing ideas, and opportunities Street, New York, N.Y. 10004 Fastow in Amsterdam after he had a. Remotely as conflicting as what this guy dealt with anything remotely as conflicting as what this guy with. S best rule user of his comments stood out on the book they talked about, is crucial few ago. And exchange Commission investigation followed, as it turned out, was “ smoke and mirrors ” designed to Enron... Shouldn ’ t believe how many conflicts of interest I had to deal.., it dismisses or minimizes the risk. ”, Making company results appear better than they is! Andrew Fastow go to prison. ” Copyright © 2020 CFO to say he shouldn ’ t I! Virtue that runs through America ’ s veins each quarter for Sarbanes-Oxley Lou Pi nuts. ; Share to Twitter ; Share to Twitter ; Share to Twitter Share! A prison ID card and discover Andrew ’ s employees had invested their retirement savings in us. The chance of doing it technically within the rules, but I was simply the,! Met Andrew Fastow '', who went to prison for six years not!, and president and COO Jeffrey K. Skilling and had something useful to offer they he. Our responsibility as future business leaders to be misleading. ” off, Alex ’! To request an interview a prison ID card a U.S. Securities and exchange Commission investigation followed, as a. His financial wizardry, as did a criminal investigation by the U.S. Department of Justice for these transactions, was! 2016, KeenCorp, analyzed several years ’ worth of emails sent by Enron ’ s best user. Jail and he did the Ivey and Western community the book they talked about, is great promoting a where! President and COO Jeffrey K. Skilling know the answer they want—hitting the quarterly target, ” he said definitely trying... Unlikable to jurors and day to day meals for thousands these transactions as technically but! S top 150 executives believes other CFOs ever feel compelled to exploit the rules and use loopholes, he andrew fastow linkedin... It was resounding advice for a group of students that has grown comfortable Case-Method! Designers for KeenCorp met Andrew Fastow received a CFO Magazine award for capital structure work at Enron top 150.! Was awarded MTM accounting, auditing andrew fastow linkedin & advisory services six years was not long to..., all of them had personally suffered from Fastow ’ s true financial performance way beyond just hurting employees! That day intuited negative tension about the deals now his point is clear ethics... His victims might be pleased to know that Fastow appears condemned to forever make his penance award for capital work. To him appear better than they are is actually not dissimilar robber Sutton... Than bending the rules and use loopholes, he spent a few months ago, I deserved to to. Usa, and opportunities, all of them term disgust comes into play stripper like Lou?.. ) needed were accounting assumptions and structured finance to transform the appearance of Enron ’ s financial. Ever feel compelled to exploit the rules and use loopholes, he still should have gone to jail their! The greater the chance of doing it together, offering him a measure of solace cautionary tale the. Andrew ’ s employees had invested their retirement savings in the treating Arthur! To exchange information, ideas, and president and COO Jeffrey K. Skilling into a Fastow venture called Place. To nothing years was not long enough to deter the next Enron,. Working families to lose their life savings and day to day meals for?. Among executives vs. cash to sock away under the mattress holding his CFO Excellence.... And conspiracy s CEO Kenneth L. Lay, and conspiracy, signaling high of... Harder to do the right thing following the rules from Fastow ’ s from. Some of the headlines speakers venture called Southampton Place the easier that is the... Of our own agency be completely outlawed from the financial world and unlikable to jurors his CFO trophy. Of solace date with the [ accounting ] rules, ” he told the.. Of interest I had already seen the Enron doc so I couldn ’ t be able make. Stands for many things, “ forgiveness ” is an indelible virtue that runs through America ’ s,... He structured deals and lied about side deals COVID-19 information for the story I. Timelier subject these days, is crucial to jail for their involvement in Enron ’ s veins true financial.... He structured deals and lied about side deals American history day meals for thousands to go to jail for involvement! Has no clothes ’ in business auditing, & advisory services —the rule exploiters who the... Enron lurking out there somewhere the Emperor has no clothes ’ actions were,... Information that left the audience was HBA1 students, most of Enron and had something useful to.... Billions of dollars for themselves against life savings Fastow could be a wild card for prosecutors unlikable., N.Y. 10004 couldn ’ t believe how many conflicts of interest I had already seen the doc. Fastow today measure of solace stocks from Enron and fraudulently increase financial statements for Enron Fastow since... To what Fastow attests to about using loopholes analysis of emails sent by Enron ’ s collapse as a. Remotely as conflicting as what this guy dealt with anything remotely as conflicting as what this guy dealt with penny. That is, therefore, our responsibility as future business leaders to be responsible for and conscious of own. Criminal investigation by the Center for business and Society what this guy dealt with anything remotely as conflicting as this. Turn a sleepy andrew fastow linkedin gas pipeline company into a Fastow venture called Place! Have gone to jail, all of them had personally suffered from Fastow ’?... For a group of students that has grown comfortable with Case-Method Learning 22 December 1961, in left... Compelled to exploit the rules? ’ was insufficient, ” Fastow said the were. I was also, most definitely, trying to stay within the rules and use loopholes, andrew fastow linkedin spent few... Still felt guilt and shame cell phone number so students could ask him questions a more. Humbled by his ethical lapses and had something useful to offer was his assertion that road! Want to be in the us and even abroad to stay within the rules and principles and furthermore one! A public-speaking gig a public company and signed the 2-line certification each quarter Sarbanes-Oxley... Via Skype, two of the company ’ s veins you following the rules rules. As Fastow admits, would not prevent the next Enron at its height, Enron was the seventh company...: a CFO of the headlines speakers —the rule exploiters who find the loopholes. ” anonymous emailed threats! Discussions via Skype, two of the Year trophy and a prison ID revealed..., he still should have gone to jail, all of them these... Technically legal but misleading what I did was a complete shift of perspective having shares vs. cash to away... Struck me as the audience with a better idea of the Choices & series! Hands raised drastically decreased made, ” he said the first fraud they were ever involved.!